A trader works on the floor of the New York Stock Exchange in New York, New York on Tuesday.
Photograph: Justin Lane/EPA

The trade dispute between the US and China escalated on Tuesday, with a senior Trump official accusing China of “theft” and Beijing accusing the US of blackmail.

The news roiled global stock markets as investors feared that escalating tensions could trigger an international trade war.

Donald Trump threatened to impose an additional $200bn in levies on Chinese goods on Monday evening, days after the US announced $50bn in tariffs aimed at punishing what the US administration sees as unfair trade practices. China has already said it will retaliate for last week’s move and said it would escalate its response if further tariffs were imposed.

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In a call with reporters Peter Navarro, White House trade adviser and a longtime critic of China’s trade practices, said China had had numerous opportunities to address Washington’s concerns but had failed to do so.

“Since China joined the World Trade Organisation in 2001, the working men and women of America have watched as more than 70,000 factories and millions of manufacturing jobs have moved offshore,” said Navarro.

He called Trump’s plans’ “courageous” and “visionary” and said they were aimed at halting China’s plans to dominate the hi-tech industries of the future – a plan, known as China 2025, that Navarro said that would mean America “will have no economic future”.

The US will issue a report on China later Tuesday. Navarro said the report would document how China seeks to “acquire the crown jewels of American technology” through means including “physical theft and cyber theft” and the acquisition of US technology by entities backed by state-backed funds.

His comments came as China’s commerce ministry said Beijing will fight back with “qualitative” and “quantitative” measures if the United States publishes an additional list of tariffs on Chinese goods.

“Such a practice of extreme pressure and blackmailing deviates from the consensus reached by both sides on multiple occasions,” the ministry said in a statement.

“The United States has initiated a trade war and violated market regulations, and is harming the interests of not just the people of China and the US, but of the world.”

Monday night’s move sent global stock markets sharply lower and the Dow followed suit, dropping 400 points in early trading and closing 237 points down, a fall that wiped out all of this year’s gains.

Some of the US’s biggest exporters were among those most affected. Boeing dropped 3% and construction and mining equipment maker Caterpillar shed 2.7%. Tech companies, too, felt the pinch with Apple down 1.5%.

US industries from agriculture to technology have expressed concern about the impact of the dispute on their businesses. Navarro said China had far more to lose than the US and its “economic aggression” would not be tolerated.

Navarro said he understood concerns about the impact of the dispute but that the tariffs would have “relatively small effects” on two countries with economies as large as China and the US.

“Our view is that these actions are necessary to defend this country and that they are ultimately bullish for corporate America, for the working men and women of America and for the global trading system for one simple reason: China’s behaviour has created a huge structural imbalance in the world economy and led to a massive wealth transfer to China, not just from us but from Europe, Japan and wherever else China is able to acquire technology from.”

The spat between the two economic superpowers is already being felt in China. Chinese stocks recorded their steepest falls since the trade dispute started on Tuesday. The benchmark Shanghai Composite Index dropped 3.8% to 2907.82, its lowest in nearly two years. The yuan fell to its lowest level against the dollar in five months. In Europe, all the major markets fell, with the FTSE closing down 0.4%, France’s CAC down 1.1% and Germany’s DAX down 1.2%. Oil prices too dipped as investors worried that the dispute would damage economic growth.

“Trump appears to be employing a similar tactic he used with North Korea, by blustering first in order to gain an advantage in negotiations,” said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo.

“The problem is, such a tactic is unlikely to work with China.”

• This article was amended on 29 June 2018 to correct “China had far more to lose than China” to “China had far more to lose than the US”.